Jane Chung and Osamu Tsukimori
SEOUL / TOKYO (Reuters) – The United States began imposing sanctions on Iran's oil products on Monday, although some of Washington's closest allies are exempt from taxes, which allows Tehran's major customers, mainly in Asia, to continue to buy crude oil.
Washington has reinstated steps that were abandoned under the 2015 Nuclear Market negotiated with Tehran by President Barack Obama.
The administration of the President Donald Trump has added 300 new names, including Iran's oil, shipping, insurance and banking sectors, aimed at capturing Iran's major export revenues from the oil industry.
Nevertheless, Iran will continue to sell some oil, as Washington said, temporarily allowing eight importers to continue to buy supplies from Iran.
It did not specify who has been granted exemptions and it lasts up to 180 days and is granted on the grounds that importers have already reduced their purchases and further diminished them.
It is not yet clear what individual volumes or total volumes are exemptions.
On Monday, South Korea was informed that it was granted an exemption to continue, at least temporarily, the import of condensate from Iran and to conduct financial transactions with the Middle East. The condensate – especially light crude oil – is a critical raw material for the South Korean petrochemical industry.
South Korea, a US ally and one of Asia's largest purchasers of Iranian oil, last week asked Washington for "maximum flexibility" when some of its construction companies had abandoned energy-related contracts in the Islamic Republic due to funding difficulties.
On Monday, Japan said that the measures were closely related to the United States, although the chief secretary of the cabinet, Yoshihide Suga, refused to provide further details.
Indian Oil Minister Dharmendra Pradhans confirmed on Saturday that the country that is the largest oil holder in China after China has released US sanctions after Prime Minister Narendra Modi's successful campaign.
India hopes that it will continue to buy about 1.25 million tons of oil a month until the end of the financial year by March 31, without changing from November's level, said a government official.
China is also trying to get the exemption, although on Monday it was not clear what volumes, if any, could be purchased.
The Chinese Foreign Ministry reiterated its objections to sanctions, but did not directly state whether China was granted an exemption.
Turkey's trade minister Ruhars Pekcan said on Saturday that Turkey had received indications that it would be among the countries to which the exemption was granted, but that an explanation had yet to be made on Monday.
Some European countries can get exemptions.
In recent years, Iran's biggest oil purchasers are China, India, South Korea, Turkey, Italy, the United Arab Emirates and Japan. Taiwan sometimes purchases Iran's crude oil, but it's not a big buyer.
Click here to see GRAPHIC on Iranian oil: 40 years of revolution, war, sanctions and bans.
Iran said it would simply ignore sanctions.
"It will be difficult for Iran to achieve maximum exports if almost all US dollars are traded off oil products, international oil companies, many oil companies, traders and banks are freed from borders," said Homayoun Falakshahi of the consulting firm Wood Mackenzie.
Total exports account for one third of Iran's government revenue. In April, exports reached 2.8 million barrels per day, including 300,000 barrels per day on a condensate basis, but has since dropped to 1.8 million bbl / d. WoodMac is predicting that volumes will continue to fall to 1 million bpd .
In October, oil prices exceeded $ 85 per barrel, fearing a sharp drop in Iranian exports. Since then, prices have fallen, hoping that some buyers will get relief, and on Monday they were settled at around $ 73.
"The US sanctions against Iran proved to be as severe as they had been expected," said Hussein Said, chief market strategist for FXTM forward mediation.
"Releasing eight countries from US sanctions, Iran's oil will continue to flood and there will be no longer a risk of supply shortages," he said.
(Reports made by Jane Chung to SEOUL, Kaori Kaneko and Osamu Tsukimori TOKYO and Ben Blanchard BEIJING; additional reports by Nidhi Verma in New Delhi; writing by Henning Gloystein and Dmitry Zhdannikov; editing by Dale Hudson, Tom Hogue and Jan Harvey)